Location A would result in annual fixed costs of $300,000 and variable costs of $55 per unit. Annual fixed costs at Location B are $600,000 with variable costs of $32 per unit. Sales volume is estimated to be 30,000 units per year. Which location has the lower cost at this volume? How large is its cost advantage? At what volume are the two facilities equal in cost?

Location A would result in annual fixed costs of $300,000 and variable costs of $55 per unit. Annual fixed costs at Location B are $600,000 with variable costs of $32 per unit. Sales volume is estimated to be 30,000 units per year. Which location has the lower cost at this volume? How large is its cost advantage? At what volume are the two facilities equal in cost?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter6: Optimization Models With Integer Variables

Section: Chapter Questions

Problem 100P

See similar textbooks

Similar questions

If the labor cost per day for Location A is $8,000 with a production of 40 units per day, and the cost per day of Location B is $9,000 with a production of 30 units per day, what is the labor cost per unit for locations A and B? Which location is more cost-efficient? Given the information in the following table, what is the weighted rating score for locations A, B, and C? Which location would you recommend based on this analysis?
A small producer of machine tools wants to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $800,000 and variable costs of $14,000 per unit; location B has annual fixed costs of $920,000 and variable costs of $13,000 per unit. The finished items sell for $17,000 each.a. At what volume of output would the two locations have the same total cost?b. For what range of output would location A be superior? For what range would B be superior?
A small producer of machine tools wants to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $160,000 and variable costs of $15,000 per unit; location B has annual fixed costs of $360,000 and variable costs of $14,000 per unit. The finished items sell for $16,000 each. a. At what volume of output would the two locations have the same total cost? Volume of Output ____________unites b.1 For what range of output would location A be superior? (Enter your answer as a whole number. Do not include the indifference point in your answer.) Range of output 0 to ______________ b.2 For what range would B be superior? (Enter your answer as a whole number. Do not include the indifference point in your answer.) Range of output _________________or more
The following table shows the fixed cost and variable cost for 3 locations. Construct cost curves for these 3 locations for production from 0 to 200 units at 20 units intervals. What would be the range of production units that would give Location A a competitive advantage? What would be the range for Location B and Location C, respectively?
A small machine tool manufacturer is looking for a larger space and has come up with two options. Annual fixed costs for location A are $800,000, with variable costs of $14,000 per year; annual fixed costs for location B are $920,000, with variable costs of $13,000 per unit. Each finished object is worth $17,000. a. At what amount of production will the net expense of the two sites be the same? b. For what production spectrum will position A be preferable? What range will B be better in?
A firm that has recently experienced an enormous growth rate is seeking to lease a small plant in Memphis, TN; Biloxi, MS; or Birmingham, AL. Prepare an economic analysis of the three locations given the following information: Annual costs for building, equipment, and administration would be $40,000 for Memphis, $60,000 for Biloxi, and $100,000 for Birmingham. Labor and materials are expected to be $8 per unit in Memphis, $4 per unit in Biloxi, and $5 per unit in Birmingham. The Memphis location would increase system transportation costs by $50,000 per year, the Biloxi location by $60,000 per year, and the Birmingham location by $25,000 per year. Expected annual volume is 10,000 units.
A manager must decide between two location alternatives, Boston and Chicago. Boston would have annual fixed costs of $70000, transportation costs of $60 per unit, and labor and material costs of $200 per unit. Chicago would have annual fixed costs of $90000, transportation costs of $40 per unit, and labor and material costs of $170 per unit. Revenue will be $300 per unit. 1. Which alternative would yeild the higher profit for an annual demand of 3000 units? 2. Would the two locations yeild the same profit at a certain volume? If so, at what volume would that be?
The Skulls, a student social organization, has two different locations underconsideration for constructing a new chapter house. Skull's president, a POM student, estimates that due to differing land costs, utility rates, etc., both fixed and variable costs would be different for each of the proposed sites, as follows: Location Annual Fixed Variable Alpha Ave $5000 $200 per person Beta Blvd $8000 $150 per person If it is estimated that thirty persons will be living in this new chapter house, which location should the Skulls select?
Sarah is a designer, but her passion is to paint. To pursue her passion Sarah would like to have an exhibition of her art work for a week. She contacts four landlords with a proposal of renting their places for a week and to her surprise all 4 accept the idea. Characteristics of each location are as follows: Sarah wants to know if people like her paintings enough to buy them. Decision objectives:1- Space not less than 600ft2.2- Location3- Decoration4- Facilities5- Overall budget including rent for one week not to exceed $300 Which store is Sarah going to choose for her art exhibition? Explain your chain of thoughts and the process.
On the cost–volume analysis chart where the costs of twoor more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which:a) fixed costs are equal for two alternative locations.b) variable costs are equal for two alternative locations.c) total costs are equal for all alternative locations.d) fixed costs equal variable costs for one location.e) total costs are equal for two alternative locations.
Sarah has a startup business that makes two distinct bird feeders that she has designed. Sarah is planning on operating a small factory to build the bird feeders. She is looking at two possible locations, A and B. If she chooses location A, the lease on the building will be higher than location B, thus leading to higher fixed costs than what she would have with location B. However, if she makes more than 20,000 units, both locations will likely have to be expanded, both the physical buildings and the manufacturing equipment. Variable costs to produce each unit will vary by location as well as by product. For example, the first design will have variable costs of $10 and $15 in locations A and B respectively, while the second bird feeder design will have variable costs of $20 and $25 respectively depending on location. However, she thinks that variable costs will decrease if she sells more than 5,000 units, as she will receive discounts from her suppliers at that point. She is unsure of…
There are three potential locations: Charlotte, NC; Atlanta, GA; and Columbia, SC.Charlotte would involve a fixed cost of $4,000 per month and a variable cost of $4 per unit;Atlanta would involve a fixed cost of $3,500 per month and a variable cost of $5 per unit; andColumbia would involve a fixed cost of $5,000 per month and a variable cost of $6 per unit. Useof the Charlotte location would increase system transportation costs by $19,000 per month,Atlanta by $22,000 per month, and Columbia by $18,000 per month. Which location would resultin the lowest total cost to handle 800 units per month?